How Climate Change Affects Insurance Rates

By Jesmany Jomarron, Esq.

While much has been made of the reasons for climate change on our planet, not a lot of discussion has taken place around the effects on the property insurance market. When it comes to calculating the likelihood of catastrophic weather, one group has an obvious and immediate financial stake in the game: insurance companies. If you own a home—or plan to—it’s very possible that the changing climate will play a role when it comes to your homeowner’s insurance rate.

This matter has recently become a very important topic to insurance companies around the world as it can have severe impacts on insured losses. Insurance rates are based on risk. If your home is in an area that very rarely gets any sort of severe weather, you will probably pay less for insurance than someone living in a beach house, for example.

However, if you live in an area with a history of extreme weather, be prepared to pay more for homeowners’ insurance. Since 1980, the number of extreme weather-related events per year costing the American people more than one billion dollars per event has increased significantly (accounting for inflation), and the total cost of these extreme events for the United States has exceeded $1.1 trillion. Improved understanding of the frequency and severity of these events in the context of a changing climate is critical. If climate change leads to more losses for insurance companies in the coming years, insurance companies might find it difficult to continue providing insurance coverage and support to property owners in disaster-prone areas. Private insurers cannot properly sustain the expected flood losses and require the federal government to support their efforts in order to continue providing coverage. If the effects of climate continue to cause increased losses, the flood insurance program may become more stressed.

As a homeowner, your best protection is attention to detail. Review your policy, and ensure you have coverage to protect you from flood, hail, hurricane, tornado, drought, and wildfire – but only if these are risks worth insuring against. Even if you don’t live in a high-risk area, budget for increased premiums of at least 15 percent. The good news is that many insurers offer mitigation discounts which can be a helpful way for homeowners to keep the coverage they have or find affordable coverage. By increasing the resilience of your home, insurance companies can feel more comfortable with the risk they are taking on (or keeping) and you will either keep your current rate or obtain a more reasonable rate.

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If your Insurance claim was denied, have Hurricane Damage, Wind Damage, Fire Damage or Flood Damage FPJL will aggressively represent you to ensure you get the money you are owed without any further delay by the insurance company. Our team of attorneys have decades of experience providing affordable representation to Individual and Corporate policy holders facing a wide range of denied, delayed or underpaid insurance claim issues.

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